With inflationary pressures facing every consumer products company, “price pack architecture” (PPA) is one way to help your organization understand the levers that drive consumer purchases and optimize those drivers across channels, delivering micro-innovations that can increase margin capture.
PPA models align a brand’s product and pricing portfolio to consumer wants and needs states, providing benefits to sales, marketing, innovation, and pricing teams. At its core, price pack architecture captures what product configurations consumers want and at what price points they’re willing to pay for those benefits, helping brands to align their product portfolios and innovation opportunities to maximize ROI and profit margin and best leverage brand equity.
Key Benefits of Price Pack Architecture
Price pack architecture is one piece of your overall brand and product strategy to effectively meet consumer needs and expectations while maximizing volume and profit for the organization. A PPA model can stimulate and unlock organizational potential and alignment including:
Collaboration Across Pricing and Innovation Teams: Your pricing and innovation teams will be able to minimize working in silos and instead maximize opportunities. Here, teams will recognize smaller innovation or renovation opportunities while still exploring radical innovation. These collaborations unlock low-hanging fruit opportunities for margin and volume capture and promote cross-functional alignment.
Consumer Mindset Realization: Organizations gain a deep understanding of the consumer mindset through the PPA process, including how, when, and why consumers shop for their products and like products, which will unlock pathways and stimulate innovation around both pricing and product/packaging development.
Omnichannel Configurations: Consumers shop across channels, and PPA is positioned to help leverage a greater understanding of those needs and behaviors so that the product portfolio can match consumer trip missions, better meeting consumers’ omnichannel needs and expectations.
Product Portfolio Management: PPA ultimately is a part of a holistic tool kit to analyze your current product mix and allow the organization to optimize the portfolio, including discontinuing items that might not be meeting consumer needs or organizational expectations.
Drive Personalization Opportunities: Consumers want to know that your brand is in touch with their needs and desire for personalization. PPA is part of the pathway to unlocking personalization, whereby consumers can find what they’re looking for from a brand with the right features, in the right pack size, in the right channel, and at the right price.
Instituting Price Pack Architecture Modeling
Before implementing price pack architecture, however, there are a number of considerations to keep in mind to determine if it’s a best fit for your organization. Below, we outline the process for instituting price pack architecture modeling and a few key considerations.
Assess & Diagnose
- Analyze current brand and category price pack architecture to understand the dynamics at play and current competitor pricing and item configurations
- Assess consumer need states, trip missions, and channel dynamics to understand consumer motivations
- Identify key purchase drivers, features, and benefits, as well as how your brand can optimize the current offerings
- Recognize category and current mix pricing thresholds, elasticities, and pricing slopes
Ideate & Prioritize
- Identify opportunity gaps in your current product configurations based on consumer behaviors and unmet needs in the category
- Ideate product configurations and key attributes to leverage gaps in consumer need states and channel dynamics
- Prioritize attributes that require consumer testing to optimize your offerings
Test & Simulate
- Conduct consumer testing around prioritized attributes to gain an understanding of which levers will have the most impact and be most meaningful to consumers
- Simulate category and channel conditions for market share and financial success, including elasticity models and pricing thresholds
- Test and learn in order to optimize product hierarchy and portfolio to maximize consumer needs and channel trends
Implement & Commercialize
- Identify product mix by channel, including overall product portfolio management, which may include discontinuation of some current offerings that don’t provide the value consumers are looking for
- Implement product enhancements and “tweaks” to leverage consumer habits and enhance margin capture, such as a new size, format, or pricing structure
- Socialize the new structure and architecture with the key cross-functional teams involved, including finance, sales, and marketing
- Evaluate results and modify plans-based learnings to optimize volume and margin contributions as well as meet consumer expectations and needs
Price pack architecture is a tool with key benefits in the overall sales and marketing alignment toolkit to drive greater collaboration, transparency, consumer centricity, and consumer engagement for a brand. PPA can be the start of an organizational transformation toward a culture of improved sales and marketing collaboration. If you would like to think about how your business can move toward that holistic sales and marketing alignment, let’s chat.
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